March 30, 2022 2022-5332 Turkey proposes new tax bill On 25 March 2022, Turkish Parliament members submitted a new tax package (the Bill) to the Parliament. The Bill addresses crucial topics including tax exemptions, tax rates and incentives, among others. The key provisions of the Bill are: Turkish corporate income tax rate is proposed to apply at 25%, instead of the standard rate of 20%, on the income of corporations in the financial sector such as banks, companies established under the Law No 6361, electronic payment institutions, asset management companies, and insurance companies.
According to Article 5/1-a of the Corporate Income Tax Law, dividends derived by corporations from the specified investment funds are exempt from corporate income tax. Under the amendment proposed by the Bill, income, in addition to the dividends, derived from returning participation shares to the fund and the earnings to be generated as a result of the year-end valuation of these participation shares are also proposed to be considered within the scope of this exemption.
According to the VAT Code, the first delivery of residences or workplaces to nonresidents are exempt from VAT provided that the consideration is brought to Turkey in foreign currency. In cases where the conditions are not satisfied, the seller and the buyer are severally responsible to fulfil the VAT liability together with the tax penalties and delay interest. If the residence or workplace that has been purchased within the scope of this VAT exemption is to be disposed in one year, the nonresident disposing the residence or workplace is responsible for payment of the unfulfilled VAT, for the reason that the conditions were not satisfied, prior to the disposal in the tittle deed registry. The Bill proposes to change the one-year disposal period to three years.
The engineering services provided to taxpayers who manufacture in Turkey electric motor vehicles that they developed as a result of their research and development activities in Turkey, within the scope of the investment incentive certificate, are proposed to be exempted from VAT until 31 December 2023.
_________________________________________ For additional information with respect to this Alert, please contact the following: Kuzey Yeminli Mali Müsavirlik A.S., Istanbul Ernst & Young LLP (United States), Turkish Tax Desk, New York |